So Mr. Weidmann, are you in or out?

Jens Weidmann – at a conference on Saturday – appears to have moderated his comment of earlier last week.

He surprised markets then by saying that negative interest rates were an option towards Euro strength. He also said that buying loans and other assets from banks was not out of the question. – but also said it was no need to act now.

The surprise element in those comments were seen towards the Bundesbank earlier opposition to the ECB’s government purchasing program, which the Bundesbank looked upon to be too close to financing governments which they clamed were outside the mandate of the ECB.

On Saturday Mr. Weidmann said that the low inflation were mainly due to lower energy and food prices. "Monetary policy should respond to such factors only in the event of second round effects," he told a conference in Berlin, saying he would not talk about current

monetary policy ahead of the ECB's monthly policy meeting next Thursday. "With regard to the rate of inflation at the moment, the Euro area is not in a self-enforcing downward spiral of price decreases, which is nominally the definition of deflation," he said.

I read the “clarification” on Saturday more from the wish to make the forthcoming meeting and its outcome a highly unpredictable one at this stage.

The Asian markets ticked a bit higher from start this week on growing hopes that the Chinese will introduce stimulus to their economy. For currencies it has been a rather subdued start of the week, which should not be a surprise given what is up of event risks this week.

This morning we get German retail sales, revised 4th quarter French GDP, Spanish current account before the critical Euro area CPI for March first releases.

Euro are CPI figures might trigger pretty strong expectations to the ECB meeting. Forecast is for 0.6% as the headline number – down from 0.8% in February. Despite the low forecast, a Reuters poll of Thursday last week showed that only 2 out of 46 economists thought the ECB would take actions this week.

I feel the way to read today’s release is that should headline CPI come out < 0.6%, then it might not offer the ECB meeting any other option but to act, while a release > 0.7% likely will mean a continued “wait and see” outcome - which means that a release of 0.6%-0.7% will keep us waiting with no further indications to what they might or might not do.

I will pay attention to the current account release from Spain. Last week we had the same releases for Portugal and Greece and they showed that there might be an element of exhaustion in terms of foreign balance surpluses at current Euro strength. It should be like that and today’s release from Spain might also confirm that. The export industries from these three countries are more sensitive to prices for which the exchange rate is a major component.

You find less of such sensitivities in German export industries simply from being industries that compete very much on technology and sophistication – more than prices.
The US session does not have a lot to offer – Chicago PMI and Dallas Fed manufacturing output index being the two releases scheduled.

At the start of the week I am flat and will remain so until the Euro area CPI release is out. I might set out a position setup ahead of the ECB meeting from this release – especially should the headline number come out < 0.6% or > 0.7%. The more tricky release to do so is the 0.6%-0.7% outcome.

Inflation data aside, I still read the market to be short and like longs from say 1.3725 and below. This would be from a more medium term outlook for which the combination of low USD interest rates and Euro area foreign balances to me still is one for a higher EURUSD.

The ideal week would therefore be to see firm actions by the ECB causing the pair to take a more severe dip and then to get long entries for this medium term outlook at a distance with great attraction.

So Mr. Weidmann – are you in on it or not?